EBRD postpones sub-Saharan move amid Ukraine war

The European Bank for Reconstruction and Development’s expansion to sub-Saharan Africa was agreed in principle but pushed back in practice last week as the war in Ukraine prompted some deft diplomacy at the lender’s annual meeting.

Going beyond existing countries of operation in northern Africa has been a topic of discussion since at least 2018. And in 2020, shareholders agreed that they would “consider an update” in 2022 on the idea of lending in sub-Saharan Africa and Iraq by 2025.

But Russia’s full-scale invasion of Ukraine in late February bolstered the view of those — such as European Investment Bank President Werner Hoyer — who say EBRD’s founding mission of helping post-Soviet states is unfinished.

Daniel F. Runde, a senior vice president and William A. Schreyer chair in global analysis at the Center for Strategic and International Studies think tank, argued in March that the war meant the bank should “double down” on helping Ukraine and declare a 10-year “moratorium on mission creep” to new countries of operation.

In the end, the final resolution agreed by shareholders last week “[approved] in-principle, a limited and incremental expansion of the geographic scope of the Bank’s operations to sub-Saharan Africa and Iraq.”

However, governors emphasized that the war on Ukraine has prompted a need “to reconfirm that any limited and incremental expansion to sub-Saharan Africa and Iraq would not in itself impair the Bank’s ability to support its existing countries of operations, compromise the Bank’s triple-A credit rating, or lead to a request for additional capital contributions.”

Subject to that reconfirmation, the resolution envisaged a decision by the bank’s governors to make the necessary change to the bank’s founding agreement “no later than at the 2023 Annual Meeting.”

According to a note from EBRD’s evaluation department in January, last week’s meeting in Marrakech, Morocco, was supposed to produce a decision on “whether, and if so, when, to how many, and which countries the Bank may expand.”

But at a press conference last week, EBRD President Odile Renaud-Basso said those details were premature.

“It's clearly not time to say which country we will go [to] first,” Renaud-Basso said. “We have worked a lot on identifying our value proposal, our positioning compared with other MDBs. But [it’s] definitely not time to set a list of countries and define which country we’ll start with.”

The text of the resolution was shared with Devex on Tuesday but is not yet publicly available on the bank’s website. However, statements by most of the bank’s 73 shareholders are available, revealing subtle differences in enthusiasm for the sub-Saharan endeavor.

Most supported the sub-Saharan African move in principle, while also favoring the wait-and-see approach to prioritize needs in Ukraine. Egypt said it could be the bank’s “gateway” to a wider expansion into Africa, while France and Germany jointly said that “we believe the expansion will send a strong signal of support to EBRD’s strategic ambition and will give confidence that the Bank can play an important role in the stabilization and economic prosperity regarding all its countries of operation.”

Others were less convinced. The European Union, while still broadly supportive of the move, said that “it is important not to lose sight of broader strategic interests for the Bank,” while Switzerland was among the most hostile.

“Switzerland is not in favour of the proposal of taking an in-principle decision on the expansion of the EBRD activities to Sub-Saharan Africa and Iraq,” the Swiss representative said. “While I acknowledge the development needs of Sub-Saharan Africa and Iraq, I strongly believe that the EBRD enhances its relevance and effectiveness in the international development architecture by prioritising its limited resources in support of its current region of operations, in complementarity with other development actors.”